Unfortunate timing for Bellevue Gold (ASX:BGL) as it completed its $150 million placement (with indications of oversubscription) coinciding with a more than 2% decline in global gold prices following a much stronger-than-expected US economic growth in the June quarter.
Normally, this would have been positive for gold, increasing the likelihood of a Fed rate cut in September. However, gold prices plummeted, with the Comex price dropping around $US50 an ounce after the GDP announcement.
While hopes for a Fed rate cut should have supported Bellevue's share price, the slump in gold prices overwhelmed this, causing the shares to lose over 22% by 11.30am, falling below the issue price of $1.55 to $1.42.
The decline in gold prices dragged down the entire sector, not just Bellevue. The gold index was down around 2% in the late morning.
Bellevue's issue price of $1.55 per share represented a 15.3% discount to Wednesday's closing price of $1.83, which typically would have allowed traders to make a quick profit on their placement shares.
However, the plunge in gold prices eliminated this opportunity. A weaker Australian dollar would normally have offset some of the impact of the falling US dollar gold price, but this did not materialize.
Bellevue raised the funds to repay debt, improve cash flow, and self-fund its expansion in line with its five-year plan, as well as increase exploration activities.
Yet, the company also mentioned significantly higher-than-expected costs in 2024-25, which is not what investors want to hear, especially when larger gold companies like Northern Star, Evolution, and Ramelius appear to have their costs under control.
CEO, Darren Stralow, expressed satisfaction with the placement:
"We are extremely pleased with the very strong support for the Placement from both our shareholders as well as new investors. With the benefit of the enhanced financial flexibility we now have, our team's focus will continue to be on unlocking the capability and value of this special mining operation by materially growing production and reducing costs, in order to maximise free cash flows and returns for our shareholders. We are also excited about the opportunity to recommence exploration at the Bellevue Gold Project, following two years of very limited exploration during commissioning and ramp up, with a number of highly prospective opportunities to grow the Resource."
The company will now gauge retail investor interest with a share purchase plan aiming to raise another $25 million at the placement price. This will be interesting to watch.
